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Agile in enterprise
resource planning:
A myth no more
ERP transformations are never easy. Agile can help improve your results.
by Didier Casanova, Swati Lohiya, Jerome Loufrani, Matteo Pacca, and Peter Peters
©Tinpixels/Getty Images
August 2019
Enterprise resource planning (ERP) solutions offer even more promising capabilities, both
are a fundamental asset for most large companies, functionally and technologically. Companies focusing
yet ERP transformations remain time-consuming on digital transformation or advanced-analytics
and complex. An agile approach has the potential programs are beginning to realize that, to unlock the
to dramatically streamline ERP projects, but full potential of their investments, linking the new
IT professionals have long believed agile to be technologies to their ERP base is essential.
incompatible with ERP. Our experience in helping
many organizations adopt agile practices in a
wide variety of situations, however, has proved the The challenges of ERP transformations
opposite: that agile can successfully be applied to As fundamental as they are, three-fourths of ERP
ERP programs, with quantifiably better results. The transformation projects fail to stay on schedule or
methodology simply has to be adapted to the unique within budget, and two-thirds have a negative return
requirements of these complex solutions. on investment. There are five main reasons (Exhibit 1).
First, all parties may not share the same objectives. For
Why ERP transformations example, a system integrator may have the incentive
remain important to increase the program’s scope and duration if it
Large ERP solutions have slipped to the bottom makes more revenue from a complex integration. The
of IT management’s agenda to make room for company, meanwhile, wants to deliver the project and
trendier topics, such as digital, big data, machine capture its value as soon as possible.
learning, and cloud. But the business benefits of ERP
solutions—namely, the enablement of seamless, end- Second, most organizations lack experience
to-end integration across functions and the process in managing major IT projects and multivendor
standardization across geographies and business programs. They do not have enough skilled
units—make them a fundamental asset for most large managers, have never set up rigorous governance
2019
companies. Moreover, the next generation of ERP for such programs, and fail to understand the level
ERP
solutions, such as Oracle Cloud and SAP S/4HANA, of input needed from business sponsors.
1 of 2
Exhibit 1
Three-quarters of enterprise resource planning transformations fail to stay on schedule or on
budget, and two-thirds have a negative return on investment.
The challenges of enterprise resource planning (ERP) transformations
These challenges often cause ERP implementations And agile helps to break down the functional scope
to drag on for five or even ten years. The typical of ERP into a smaller set of features that small teams
implementation involves long phases of design, can deliver in sprints. This iterative approach helps
specifications, and blueprinting but yields no projects to realize business value quickly.
measurable impact—while shareholder value
diminishes, day after day. In short, agile practices are exactly what is needed
to manage ERP implementations. It should be no
surprise that leading ERP vendors, such as SAP, are
The misconceptions and truths about now promoting a more agile approach.
agile and ERP
The myth that agile methodology cannot be applied
to ERP implementations is based on several How to adapt agile to ERP
misconceptions: that an ERP implementation is too Some agile practices can be directly applied to
big and complex to be managed and delivered by ERP implementations without adaptation: forming
small agile teams, meaning that highly integrated, small, end-to-end, cross-functional agile teams,
intricate ERP requirements cannot be broken down with dedicated product owners from the business
into vertical user stories that can be developed and and end users; working in short cycles of two
tested in the short sprints that define agile delivery; to three weeks to produce working software (or
that ERP is a standardized software, and that hence configurations, interfaces, et cetera) incrementally;
an agile approach—which is designed for constantly adopting scrum-based ceremonies focusing
changing or unknown requirements—is not needed or on continuous improvement, with transparency
applicable; and that an ERP solution cannot be shown facilitated by the ceremonies and KPIs; and using
incrementally to end users, as they will not be able to tools and technologies—such as test automation
perceive any value before it is fully built and integrated. and continuous integration—that optimize and
accelerate the delivery process.
In truth, agile practices can greatly mitigate the
risks and challenges that plague typical ERP Other agile practices, however, need to be adapted
implementations in a number of ways. Agile has, further. For instance, the project’s entire scope must
Exhibit 2
Enterprise resource planning transformations are always challenging, but these challenges
can be far less daunting with an agile approach.
Some benefits of adapting agile to enterprise resource planning (ERP) transformations
1
Michael Bazigos, Aaron De Smet, and Chris Gagnon, “Why agility pays,” McKinsey Quarterly, December 2015, McKinsey.com.
Didier Casanova is an associate partner in McKinsey’s Brussels office; Swati Lohiya is a senior expert in the London office;
Jerome Loufrani is an associate partner in the Paris office, where Matteo Pacca is a senior partner; and Peter Peters is a
partner in the Düsseldorf office.
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